Doubts weigh on ASX cash call
The company emerged from a three-day trading halt to reveal it had raised $267 million so far in the discounted share offer to institutional investors, with retail investors to start taking up the offer from Monday.
The share offer is aimed at raising funds the exchange says are needed to meet new capital rules expected for its clearing house service.
Investors are able to buy two shares for every 19 shares at the lower price of $30.
There was a slight shortfall in the take-up, however, with large fund managers and other investors taking up only 96 per cent of the new shares available. The remaining 4 per cent of the rights entitlements were sold and cleared at $3.70 - with investors signed up to a shortfall arrangement paying $33.70 per new share, the company said.
The company's share price was just below $35 before the trading halt was lifted. The shares closed $2.69 lower to $33.15.
Although analysts expected the shares to trade lower as a result of the program, Deutsche Bank analyst Kieren Chidgey said the fall also showed a lack of confidence among investors over the decision to raise funds - especially when debt was so cheap and readily available.
"People are asking questions. They can't understand the rationale behind the way they've chosen to fund this through equity rather than debt," he said.
Mr Chidgey said the decision might lead some to assume the ASX's management wanted to save their debt capacity for acquisitions in the future. "This is a potential concern given you don't know what they're going to buy."
The offer, fully underwritten by UBS, was announced by the operator on Tuesday. It was expected to dilute earnings per share by 5.1 per cent.
The company said the money raised would go to ASX Clear, the clearing facility for all futures and options, and to paying off $250 million in debt from a subsidiary, ASX Clearing Corporation.
ASX chief Elmer Funke Kupper said the funds would help the company compete with foreign clearing houses. "If you want to play on the global stage, you need to adhere to the highest available standards," he said.
The company also issued an update on its performance, warning it would pay a final dividend of 81¢, about 12 per cent below analyst forecasts. Its full-year profit would be about $346 million, just below market forecasts.
ASX Ltd hopes to raise a further $286 million in the retail share offer.
Frequently Asked Questions about this Article…
ASX Ltd has launched a discounted share offer (a rights issue) to raise a total of $553 million to meet new capital rules for its clearing house service, ASX Clear. The company says the proceeds will also be used to pay off $250 million in debt from its subsidiary, ASX Clearing Corporation, and to help the clearing business compete with foreign clearing houses.
The company emerged from a three‑day trading halt having raised $267 million so far from the discounted offer to institutional investors. ASX Ltd hopes to raise a further $286 million through the retail share offer when retail investors can begin participating.
Under the offer, investors can buy two new ASX shares for every 19 shares they already own at a price of $30 per new share. Retail investors were scheduled to start taking up the offer from Monday, according to the announcement.
ASX shares fell about 6% on the day the company revealed the capital raising, reflecting investor doubts about the rationale for raising equity rather than using cheap, available debt. The shares closed $2.69 lower at $33.15 after trading resumed (they had been just under $35 before the trading halt).
Yes — the offer is fully underwritten by UBS. The rights issue was expected to dilute earnings per share by about 5.1%.
Deutsche Bank analyst Kieren Chidgey and others noted investors questioned why ASX chose equity when debt was cheap and available. Some investors worry management may be preserving debt capacity for potential future acquisitions, which raises concerns because the nature of any acquisitions is unknown.
Large fund managers and other investors took up about 96% of the new shares available. The remaining 4% of rights entitlements were sold and cleared at $3.70, and investors signed up to a shortfall arrangement paid $33.70 per new share, the company said.
ASX issued a performance update saying it would pay a final dividend of 81 cents, about 12% below analyst forecasts. The company also indicated its full‑year profit would be around $346 million, which is just below market forecasts.
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